Audits detail fiscal problems of city phone system, pensions

Luke Broadwater, The Baltimore Sun

Audits released Wednesday offered new details about two of the city's ongoing financial problems: money wasted by the outdated municipal phone system and the unfunded liabilities of the Police and Fire departments' pension plans.

The independent HPA Consulting Group of Rochester, N.Y., said the city phone system is wasting as much as $1 million annually. The system, run by Comptroller Joan M. Pratt's office, could save as much as $700,000 a year by eliminating lines that are "no longer being used," the report states.

Among other savings, the consultants said, switching from month-to-month to longer contractual payments for some lines could save the city as much as $150,000 annually. The report follows earlier estimates by the Mayor's Office of Information Technology.

"We realize there are potential savings," Pratt said. "That's why we contracted with HPA to do the audit. We look forward to following their recommendations because we believe some lines need to be disconnected."

Even so, the company — which Pratt asked to audit the municipal phones — said the system is relatively well run.

"The City's telecom services are better managed and are much healthier than most government entities that HPA has audited in the past," the report states.

Last year, Chris Tonjes, who heads the Mayor's Office of Information Technology, estimated that Baltimore likely could save 15 percent of its $16 million annual phone bill, or $2.4 million a year, by eliminating idle phone lines.

While the city can realize savings on its current phone system contract, Pratt has said even more money can be saved by switching to a voice-over-internet-protocol system.

"That's the whole reason we want to implement [a replacement] project, so the city can start realizing the benefit of about $400,000 in savings per month," Pratt said.

Meanwhile, city auditor Robert L. McCarty released a report on the Fire & Police Employees' Retirement System. The audit showed public safety pensions are growing more troublesome by the year.

In 2003, 96 percent of the public safety pensions were funded, with $81 million in unfunded liabilities on the books. For 2012, however, the percentage of fully funded pensions has dropped to 77 percent. The public safety pension system now has $712 million in unfunded liabilities, the report states.

The audit states that 276 retirees, including 15 in their 30s, receive non-line-of-duty disability payments, costing the city about $5.1 million annually.

McCarty said the audit also revealed three children who were improperly receiving their parents' benefits after the retirees died, costing the system about $43,000.

"We are pursuing those overpayments and we hope to resolve that," said Thomas P. Taneyhill, executive director of the public safety retirement system.

Rawlings-Blake has consistently pointed to pension payments as a major driver of the city's long-term financial woes. Last month, she said she wants to require more city employees to contribute some of their salaries to their pensions, while moving to a 401(k)-style retirement plan for new civilian hires. She also proposed a new "hybrid" retirement system for new employees of the Police and Fire departments.

In 2010, Rawlings-Blake moved to overhaul the pension system for police and fire employees, delaying retirement for many and increasing their contributions to the pension system. A federal judge struck down one aspect of that overhaul last year but said the rest of the law could stand.